Contents lists available at ScienceDirect Journal of Business Research journal homepage: www.elsevier.com/locate/jbusres A model for the role of trust in firm level performance: The case of family businesses Mathew R. Allen a, ⁎ , Bradley A. George a , James H. Davis b a Babson College, United States b Utah State University, John M. Huntsman School of Business, United States ARTICLE INFO Keywords: Trust Family business Relational governance Commitment ABSTRACT We explore the process through which trust within family firm leadership contributes to firm level performance. Specifically, we develop a model describing the underlying process through which trust influences commitment and in turn organizational performance. The effect of trust on the performance of family businesses is further understood by addressing the role of family member status and generation in moderating the relationship be- tween trust and commitment. We test this model using longitudinal responses from top managers in family businesses. Results indicate that the effect of trust on performance takes place through commitment with family member status moderating the relationship. 1. Introduction For management researchers, family businesses represent a unique context from the standpoint of governance, management, and decision making as power and ownership are concentrated within the family (Schulze, Lubatkin, Dino, & Buchholtz, 2001). Furthermore, research indicates that this involvement of family in the management of family businesses has important strategic implications with family businesses outperforming their non-family counterparts in some circumstances (Anderson & Reeb, 2003). While research comparing the differences between family and non-family businesses relative to performance is interesting, it is essential for researchers to understand the unique structures and processes within family businesses and how those con- tribute to performance. Researchers have argued that performance advantages of family businesses are tied to their closely held nature where both ownership and control are often embodied in the same individual or family (Chrisman, Chua, & Litz, 2004; González-Cruz & Cruz-Ros, 2016). Specifically, researchers have pointed to family firm governance as one source of competitive advantage leading to these higher levels of per- formance (Carney, 2005). This strategic benefit is the result of family businesses relying on a more personalized form of governance based on relationships, family influence and most importantly, alignment of in- terests between top decision makers and owners (Carney, 2005; Steier, 2001). This relational structure has been shown to contribute to in- creased levels of commitment, cooperation, and flexibility as well as reduced transaction costs leading to higher performance (Carson, Madhok, & Wu, 2006; Jeffries & Reed, 2000; Poppo, Zhou, & Zenger, 2008; Uhlaner, Floren, & Geerlings, 2007). This reliance on relational governance and high levels of alignment between leaders in a family business raises questions about the im- portance of trust in the family business context. Defined as a willingness to be vulnerable and place oneself at risk in relation to another (Mayer, Davis, & Schoorman, 1995), trust has been described as a “lubricant” facilitating relationships especially in the face of risks and uncertainties (Cruz, Gomez-Mejia, & Becerra, 2010, p. 79). Where market structures and organizational dynamics (bureaucracy and clan) control manage- rial behavior; trustee exposure, risk and vulnerability is controlled and trust is not needed (Ouchi, 1980). Specifically trust matters when risk- taking in relationships is prevalent such as when establishing or con- tinuing a relationship with another party exposes one to risks related to that relationship (Mayer et al., 1995). In the case of family business, researchers have argued that because of the tight nature of the re- lationships and the high levels of alignment between decision makers, trust might matter less in the family business context (Schulze et al., 2001). While the importance of trust and performance among top lea- ders of non-family businesses is well established (Carmeli, Tishler, & Edmondson, 2012; Olson, Parayitam, & Bao, 2007), the role of trust among leaders in family businesses is less clear (Cruz et al., 2010). In this manuscript we seek to clarify the role of trust in the top management team of family businesses and examine how it may sub- sequently play a role in family business performance. By building on work arguing that altruism within families can lead to alignment re- garding decision making in family businesses (Schulze, Lubatkin, & https://doi.org/10.1016/j.jbusres.2017.10.048 Received 15 December 2016; Received in revised form 5 August 2017; Accepted 21 October 2017 ⁎ Corresponding author. E-mail addresses: mallen4@babson.edu (M.R. Allen), bgeorge@babson.edu (B.A. George), j.davis@usu.edu (J.H. Davis). Journal of Business Research 84 (2018) 34–45 0148-2963/ © 2017 Elsevier Inc. All rights reserved. MARK